Important questions about Cost of Capital. Cost of Capital MCQ questions with answers. Cost of Capital exam questions and answers for students and interviews.

During the planning period, a marginal cost for raising a new debt is classified as

Options

A : a. debt cost

B : b. relevant cost

C : c. borrowing cost

D : d. embedded cost

The cost of common stock is 14% and the bond risk premium is 9% then the bond yield will be

Options

A : a. 0.0156

B : b. 0.05

C : c. 0.23

D : d. 0.6428

A risk associated with the project and the way considered by well diversified stockholder is classified as

Options

A : a. expected risk

B : b. beta risk

C : c. industry risk

D : d. returning risk

The cost of common stock is 13% and the bond risk premium is 5% then the bond yield would be

Options

A : a. 18

B : b. 0.026

C : c. 0.08

D : d. 0.18

The variability for the expected returns for projects is classified as

Options

A : a. expected risk

B : b. stand-alone risk

C : c. variable risk

D : d. returning risk

The cost of common stock is 16% and the bond yield is 9% then the bond risk premium would be

Options

A : a. 0.07

B : b. 7

C : c. 0.0178

D : d. 0.25

If the future return on common stock is 14% and the rate on T-bonds is 5% then the current market risk premium will be

Options

A : a. 0.19

B : b. 0.09

C : c. 9

D : d. 19

The cost of capital is equal to required return rate on equity in the case if investors are only

Options

A : a. valuation manager

B : b. common stockholders

C : c. asset seller

D : d. equity dealer

The interest rate is 12% and the tax savings (1-0.40) then the after-tax component cost of debt will be

Options

A : a. 0.072

B : b. 7.2 times

C : c. 17.14 times

D : d. 17.14

The retention ratio is 0.60 and the return on equity is 15.5% then the growth retention model would be

Options

A : a. 0.149

B : b. 0.2584

C : c. 0.161

D : d. 0.093

The method uses for an estimation of cost of equity is classified as

Options

A : a. market cash flow

B : b. future cash flow method

C : c. discounted cash flow method

D : d. present cash flow method

The method in which company finds other companies considered in same line of business to evaluate divisions is classified as

Options

A : a. pure play method

B : b. same play method

C : c. division line method

D : d. single product method

The bond risk premium is added in to bond yield to calculate

Options

A : a. cost of American option

B : b. cost of European option

C : c. cost of common stock

D : d. cost of preferred stock

The stock selling price is $45, an expected dividend is $10 and an expected growth rate is 8% then cost of common stock would be

Options

A : a. 55

B : b. 58

C : c. 53

D : d. 0.3022

The dividend per share is $18 and sell it for $122 and floatation cost is $4 then the component cost of preferred stock will be

Options

A : a. 0.1525

B : b. 0.1525 times

C : c. 15.25

D : d. 0.001525

In weighted average capital, the capital structure weights estimation does not rely on the value of

Options

A : a. investors equity

B : b. market value of equity

C : c. book value of equity

D : d. stock equity

The interest rates, tax rates and market risk premium are the factors which an/a

Options

A : a. industry cannot control

B : b. industry cannot control

C : c. firm must control

D : d. firm cannot control

If the payout ratio is 0.45 then the retention ratio will be

Options

A : a. 0.55

B : b. 1.45

C : c. 1.82

D : d. 0.45

The stock selling price is $35, expected dividend is $5 and expected growth rate is 8% then cost of common stock would be

Options

A : a. 40

B : b. 0.2229

C : c. 0.1428

D : d. 80

The retention ratio is 0.55 and the return on equity is 12.5% then the growth retention model would be

Options

A : a. 0.1195

B : b. 0.06875

C : c. 0.1305

D : d. 0.2272

Financial Management and Financial Markets more Online Exam Quiz